§ 458. Close of the Trust.-The time for closing the trust is sometimes fixed by the assignment itself.1 If no time be limited the assignee will be allowed what may be considered, under all the circumstances, a reasonable time for the purpose.

2

Sometimes the trust will be considered as closed by lapse of time. As a general rule of equity, an assignee in trust cannot set up the statute of limitations against his cestui que trust, such direct trusts not being within the statute. The possession of the trust fund in the hands of the trustee or assignee, is the possession of the cestui que trust for creditors, and is not held adversely to them. But after twenty years, the law presumes the debts paid and the trust executed, so far as respects creditors. It has been held, however, in Pennsylvania, that the lapse of seventeen years without corroborating circumstances was too short a time to raise a legal presumption that the objects of an assignment have either been accomplished or abandoned.*

2

1 Dana v. Bank of U. S. 5 W. & S. 223.

Cunningham_v. Freeborn, 11 Wend. 241; Stevens v. Bell, 6 Mass. 339; Farmers' Bank v. Douglass, 11 Sm. & M. 469, 539; Gibson v. Recs, 50 Ill. 383; In re Estate of Potter & Paige, 54 Penn. St. 465; Mellish's Estate, 1 Pars. (Penn.) Sel. Cases, 482; and see Morrison v. Brand, 5 Daly, 40; see 2 Perry on Trusts, pp. 555, et seq. And by a recent statute in New York, it is provided that "where the purposes for which an express trust shall have been created, shall have ceased, the estate of the trustee shall also cease, and where an estate has been conveyed to trustees for the benefit of creditors, and no different limitation is contained in the instrument conveying the trust, such trust shall be deemed discharged at the end of twenty-five years from the creation of the same; and the estate conveyed to trustee or trustees, and not granted or conveyed by him or them, shall revert to the grantor or grantors, his or their heirs or devisees, or persons claiming under them, to the same effect as though such trust had not been created." Laws of 1875, c. 545; 3 Rev. Stat. (7th ed.) p. 2183, § 67. But this statute does not operate retrospectively. McCahill v. Hamilton, 20 Hun, 388.

Coates' Estate, 2 Pars. (Penn.) Sel. Cases, 258; Gibson v. Rees, 50 Ill. 382; Hunter v. Hubbard, 26 Tex. 537. In the last case it is said: The statute does not begin to run in favor of the trustee, so long as the trust continues and is acknowledged to be a continuing subsisting trust, for the reason that the possession of the trustee is the possession of the cestui que trust. But if he claim

to hold the trust fund as his own, and adversely to the cestui que trust, and the latter has knowledge of the fact, then, from the time of such adverse holding, the statute will run in favor of the trustee. And so in general when the relation is terminated by a breach of trust. Wickliffe v. The City of Lexington, 11 B.

Mon. 161.

Adlum v. Yard, 1 Rawle, 163.

The trust may also be determined by the acts of the parties. A trust to sell real estate for the payment of debts ceases when the debts are, in any mode, paid or discharged. Thus, in a case in New York, where a debtor conveyed lands to trustees, upon trust to sell the same for the benefit of certain specified creditors, and to reconvey to himself such parts of the property as should remain unsold after satisfying the trusts; and afterwards conveyed his residuary interest in the property to the same trustees, for the benefit of the same creditors, and in satisfaction of their demands; the creditors, on their part, accepting the trust fund as a satisfaction of their claims, it was held that the original trust was determined, and that the whole legal and equitable title to the property became vested, under the statute,' in the creditors.2

1

1 Rev. Stat. 728, §§ 47, 49; 3 R. S. (7th ed.) p. 2180.

* Selden v. Vermilya, 3 N. Y. 525; see Earle v. N. Y. Life Ins. Co. 7 Daly, 303.

CHAPTER XL.

LIABILITY OF ASSIGNEES.

§ 459. The liability of an assignee in trust for creditors, though sometimes expressly assumed in terms, as where he becomes a formal covenanting party to the assignment, follows, independently of any such express undertaking, as a legal consequence of his acceptance of the trust. It is a liability which attaches to his office as a trustee; and it operates as a security for the faithful performance of that office, for the benefit of those whose interests are so extensively confided to him.

An action at law cannot be maintained against the assignee to recover the amount of a debt due a creditor, on the ground that the assignee has neglected to collect an amount due upon the sale of assigned property, and apply it to the payment of the creditor in discharge of the trust.1 But it seems that a count against trustees as such may be joined with a count against them personally. In order to maintain his action, the creditor must show not only that the estate, but that he, personally, has been injured by the wrong complained of. Thus, a creditor of an inferior class, under an assignment containing preferences, cannot sustain his action against the trustee for wasting the assets, without showing that the assets were sufficient to pay the creditors preferred to him in full.3

How far the assignor will be protected from the claims

' Rush v. Good, 14 S. & R. 226; but see Mitchell v. Kendall, 45 Me. 234. 3 Davenport v. McCole, 28 Ind. 495.

In Caldwell v. Coates (78 Penn. St. 312), a firm assigned to three of its creditors and put them in possession of their factory to conduct the business, and from the proceeds to pay these creditors and other liabilities. This was held to impose on the assignees only a liability to account; and in an attachment against the assignors-the assignees being garnishees-the plaintiffs must show that the

of creditors where the assigned property was insufficient to pay the indebtedness, but has been wasted or misapplied by the assignees, is a question not free from doubt. It has been said that where the assignee is selected by the debtor, the waste of the assets by the assignee is no defense, but that the rule is otherwise where the assignee is selected by the creditors.1

§ 460. Extent of Liability.-The liability of an assignee is, for the most part, commensurate with the duty which the assignment imposes upon him." This duty may, in its most general terms, be stated to be-to observe good faith in all his transactions, and to exercise all reasonable diligence and carefulness in the management of the trust. Hence, a want of good faith or of proper diligence will subject him to any loss which may be consequent upon it.3

For gross misconduct, or a violation or abuse of the trust, such as a willful misapplication of the trust funds in his hands, an assignee is not only personally responsible,* but may be dismissed from office. But negligence, either in the collection and recovery of the property assigned, or

garnishees had assets in their hands liable to attachment, and must make out a case of indebtedness sufficient to recover in assumpsit. As to the liability of an assignee as garnishee, see Smith v. Millett, 11 R. I. 528.

In Peters v. Light (76 Penn. St. 289), a debtor assigned all his estate to assignees and those elected by creditors to succeed them to carry on his iron manufactory, with power to distribute the estate at the discretion of creditors. The trustees advanced money and made iron. It was held that, this being the product of the capital and labor of the trustees, a non-assenting creditor of the assignor could not seize the iron on execution.

'Hargrooves v. Chambers, 30 Ga. 580; see Bailey v. Bergen, 67 N. Y. 346. In Gschwend v. Estes (51 Cal. 134), it was held that if a debtor agrees with his creditors that a person named shall take charge of his property as trustee for the creditors, with authority to sell the property and apply the proceeds to the payment of the debts, and the trustee accepts, and the creditors control the trustee in the management of the business, the debtor is entitled in equity to have the proceeds in the hands of the trustee applied as a credit on the debts, and is not compelled to look to the trustee for the same, if he fails to make a proper application of such proceeds.

It has, however, been said that the liability of trustees is not measured by the abstract rule of their duty. Hext v. Porcher, 1 Strobh. Eq. 170.

Freeman v. Cook, 6 Ired. Eq. 373.

Williams v. Otey, 8 Humph. 563; see Winn v. Crosby, 52 How. Pr. 174; Clark v. Gibboney, 3 Hughes, 391; Dorr v. Gibboney, Id. 382.

in the custody and management of it, or in the final disposition of it by sale and payment to creditors, is the ground upon which assignees are, in practice, most frequently held liable. Thus, a trustee is answerable for property or money lost by his gross negligence.1 But an assignee's liability is not confined to gross negligence, nor can it be so limited by any stipulation on his part, in the deed of assignment. This was so decided in a case in the Superior Court of the city of New York, in which the subject was well considered, and the general rule stated to be that a trustee is bound to manage and employ the trust property for the benefit of the cestui que trust, with the care and diligence of a provident owner. Consequently he is liable for every loss sustained by reason of his negligence, want of caution, or mistake, as well as for positive misconduct. On this ground of ordinary negligence, assignees have been held liable for neglecting to recover debts assigned; for omitting

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'Hurtt v. Fisher, 1 Harr. & Gill, 88; Meacham v. Sternes, 9 Paige, 398, 405. In Rodman v. Nathan (45 Mich. 607), the assignor resumed control of the goods and the assignee brought replevin. It was held that losses by the assignee's negligence could not be charged on him in this or any suit at law; that the remedy was in equity.

Where it appears by the findings of an auditor that the assignee has been guilty of willful and supine negligence he will be surcharged, and where the surcharge is imposed for negligence and mismanagement in the disposal of the assigned property, the correct rule is that the difference between the price which the assignee received and the price which he might have received is to form the basis of the surcharge. In re Wear, 1 Luz. Leg. Reg. 104.

'Litchfield v. White, 3 Sandf. S. C. 545; affirmed by the Court of Appeals, 7 N. Y. 438.

' Willis on Trustees, 125, 169; Goodwin v. Mix, 38 Ill. 115; Davis v. Harman, 21 Gratt. 200; Olmsted v. Herrick, 1 E. D. Smith, 310.

Willis on Trustees, 172, 173; 2 Kent's Com. 230; cited by Sandford, J., 3 Sandf. S. C. 551; and see the observations of Ruggles, C. J., in Litchfield v. White, 7 N. Y. 443, 444.

"Royall's Adm'r v. McKenzie, 25 Ala. 363; Winn v. Crosby, 52 How. Pr. 174, cited ante, p. 644.

Where a debtor conveyed his property in trust to pay certain debts divided into three classes, and one of the second class creditors directed the trustee to withhold from collection an amount sufficient to pay his debt, which was done, and the note so withheld by the trustee became worthless, but not through any default of the trustee, it was held that the creditor was not entitled to a pro rata share of the money collected for the benefit of the second class creditors, and that the trustee was not liable therefor. Bason v. Harden, 72 N. Ca. 287.